Retirement savings a tough budget to manage

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“Most people today unfortunately do not have enough to retire. I don’t’ think there’s more that 10 per cent of the population – I’m talking about the working population – that is able to retire comfortably, and out of that 10 per cent probably three or four per cent are actually able to retire very well,” Andrew Leventis, senior wealth manager at Alexander Forbes, told CNBC Africa.

“The problem is that most people, when they’re in their working careers, [are probably concerned with] how much can I buy a new car for, I want to spend as much as I can, and when you get to about 50, you say ‘I’m not going to retire until about 65, so I’ve got another 15 years’. In the meantime you’re actually losing time. You’re not saving enough, and when people resign from jobs they actually take their money and spend [it], and they don’t have enough.”

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Leventis added that the rule of thumb is that the average person would need to have 30 times what they earn per month in order to retire well.

A million rand worth of retirement savings from a 100,00 rand salary per annum, according to Leventis, would be highly insufficient, and end up running out within the first five to six years of retirement.  

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“That’s one of the biggest problems: not having enough money. People [are] spending too much and they’re not saving enough. You should be saving at least five to 15 per cent of one’s salary especially while young, and really pushing up to 25 per cent when you’re much older,” Leventis explained.

“They say that if you are retiring at 65, the probability of one of the two spouses – I’m assuming there’s a spouse – one will still be around 30 years down the road, so you need a 30-year horizon to pay an income. If you had an income requirement of let’s say 100,000 rand a year, which is just under 10,000 rand a month, and you needed 30 years of that, you need 30 times that plus the growth. It’s a lot of money that you need.”